Talk of the Day -- Brace for economic austerity

2012/05/23 23:07:47

Terry Gou, chairman of Hon Hai Group -- the world's largest electronics manufacturing service provider -- has offered a pessimistic forecast of the global economic outlook, advising people around the world to brace for economic austerity.

In an interview with the Taipei-based Chinese-language Business Weekly, Gou said he sees few bright spots on economic landscape of the world's three trade powerhouses -- Europe, the United States and China -- in the coming years.

Gou has been lauded as one of the best market analysts because Hong Hai Group, which owns China-based Foxconn Technology Group, assembles consumer electronics for many renowned brands, including Apple Inc.

Meanwhile, Eisuke Sakakibara, a former Japanese Vice Finance Minister nicknamed "Mr. Yen" due to his ability to influence the Japanese yen rate through his outspokenness and government intervention in currency markets, also predicted in Taipei Wednesday that the world economy could sink into the worst recession since World War II.

The following are excerpts from a special report in the Wednesday edition of the United Evening News on Gou and Sakakibara's forecasts on the global economic development in the coming two years:

Gou said in the interview with Business Weekly that the European economy is truly in bad shape, citing information from Metro AG, Germany's largest and Europe's second largest retail and wholesale group.

"We in the electronics industry tend to be very sensitive to market trends and we maintain close cooperation with Metro," Gou said, adding that both Hon Hai and Metro are bracing for the worst.

On the U.S. economic prospects, Gou said its economy may be not too bad in short term as 2012 is an election year in the United States.

"But 2013 could be a gloomy year for the U.S. economy," Gou predicted, adding that the U.S. government would definitely launch QE3 easy money policy sooner or later.

As to China's economic outlook, Gou said its exports would further shrink or slow down in the foreseeable future.

Foxconn Group alone accounted for 6.7 percent of China's overall exports in the January-March quarter of this year, compared to 5.8 percent a year ago.

Noting that his group's trading volume could serve as a gauge of China's trading tendency, Gou said the increase in Foxconn's ratio indicates that his group performs better than China's overall trading sector.

Asked about how long China's competitiveness in manufacturing industry can last, Gou said China excels in its "low environmental cost," but he did not elaborate.

Also on Wednesday, Sakakibara said at a seminar in Taipei that Taiwan should accelerate negotiations of free trade agreements with countries other than China to enhance its competitive edge. (May 23, 2012).